Nassau's short-term debt downgraded
The Credit: AFP/Getty ImagesWall Street sign near the front of the New York Stock Exchange. Despite a recent Wall Street downgrading, Suffolk County has sold $152 million in bond and revenue anticipation notes at lower interest rates than before the bond rating dropped. (Aug. 5, 2011)
A Wall Street rating agency has downgraded $264 million in short-term Nassau County debt by a notch and revised the outlook on its long-term debt from stable to negative.
Fitch Ratings said Thursday that the negative outlook reflects "concern over the county's continued difficulty" in improving "financial and budgetary stability despite the presence of a state control board." The agency noted Nassau's "high dependence" on sales tax revenues, "consistent use" of one-shot revenues to close budget gaps and its long-term labor contracts.
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A Wall Street rating agency has downgraded $264 million in short-term Nassau County debt by a notch and revised the outlook on its long-term debt from stable to negative.
Fitch Ratings said Thursday that the negative outlook reflects "concern over the county's continued difficulty" in improving "financial and budgetary stability despite the presence of a state control board." The agency noted Nassau's "high dependence" on sales tax revenues, "consistent use" of one-shot revenues to close budget gaps and its long-term labor contracts.
Fitch also cited the county legislature's rejection of bonding to pay tax refunds and rejection by the Nassau Interim Finance Authority, a state monitoring board that controls the county's finances, of a contract associated with a plan to have a private operator run Nassau's sewage treatment system.
However, Fitch lauded an effort by County Executive Edward Mangano to make school, town and other special district taxes reimburse Nassau for tax refunds it makes on their behalf. The agency also noted that Nassau "benefits from a broad and wealthy economic base with high wealth levels."
In reaction to the Fitch report, Mangano criticized Democratic county legislators for refusing to back borrowing to pay tax refunds. In a letter, Mangano asked them to meet with him Monday because "Fitch's actions could have financial repercussions that place increased costs on our residents."
Credit downgrades can spark an increase in municipalities' borrowing costs.
Minority Leader Kevan Abrahams (D-Freeport,) agreed to represent the nine legislative Democrats at the meeting. Abrahams called the Fitch report "just the latest example of how the Mangano Administration has mismanaged the county finances."
County Comptroller George Maragos criticized Democrats and NIFA for not cooperating. NIFA has declined to approve new borrowing for tax refunds until Mangano secures $150 million in recurring labor savings.
"The negative outlook is a loud and clear warning that the continuing failure of cooperation by NIFA and the Legislative Minority Caucus. . . will have negative consequences," Maragos, a Republican who is seeking his party's nomination for U.S. Senate, said in a statement.
NIFA Chairman Ronald Stack could not be reached.
With Joye Brown